Fed officials worry about the future as U.S. economy struggles
Updated: Jun 5, 2020
Federal Reserve Chair Jerome Powell warned on Thursday that the United States was experiencing a severe shock from the coronavirus pandemic, and that it was unclear when prosperity would return.
Powell called the state of the economy in a "downturn without modern precedent."
"In the best of times, predicting the path of the economy with any certainty is difficult," Powell said. "We are now experiencing a whole new level of uncertainty, as questions only the virus can answer complicate the outlook."
The Fed's Vice Chair, Richard Clarida, indicated that the Federal Reserve as well as Congress may need to do more.
"Depending on the course the virus takes and the depth and duration of the downturn it causes, additional support from both monetary and fiscal policies may be called for,"Clarida said.
Meanwhile, the labor market continues to recoil from strict social distancing policies as another 2.4 million Americans filed for unemployment benefits last week, in line with expectations.
While the number of filings continues to fall from its peak of nearly 7 million in late March, there have now been nearly 40 million Americans who filed for unemployment benefits since the start of the pandemic, an unprecedented figure.
Republican members of Congress as well as the Trump administration are uncertain that additional spending by government is required, while Democrats put forward another $3 trillion spending package that included extending federal unemployment benefits to 2021 as well as giving funds to struggling state and local governments. The bill was rejected by Republicans, who said it would provide a disincentive to work and find work.
The government's Paycheck Protection Program loans from the Small Business Administration may have helped small businesses to some degree, with 80% of business owners survey saying they applied for a loan, and 90% of those receiving funding.
However, more than half of business owners expect all expenses to be forgiven, and 27% say they expect three-quarters of their loan to be forgiven, according to a survey by the National Federation of Independent Business.
Perhaps still more would expect complete forgiveness, but business owners said that report requirements are challenging to comply with or meet in order to qualify for the maximum possible loan forgiveness.
The SBA and the Department of Treasury released a forgiveness application last week for borrowers and promised more guidance for all parties involved in the future.